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Online Helps Blockbuster Post Slight Profit

9 Mar, 2005 By: Erik Gruenwedel

Buoyed by a near 23 percent increase in retail sales, including an 8 percent rise in same-store video game sales, Blockbuster Inc. reported fourth quarter (ended Dec. 31, 2004) net income of $900,000 compared to a loss of $1.2 billion, or $6.57 per share during the same period the prior year.

Revenue for the quarter topped $1.7 billion, up 6 percent from $1.6 billion the previous year. For the fiscal year, revenue exceeded $6 billion, up slightly more than 2 percent from $5.9 billion.

In an investor call, John Antioco, Blockbuster chairman and CEO, said the Dallas-based No. 1 video rental company was cooperating with various states' concerns over its “No Late Fees” campaign.

Last week, the Federal Trade Commission sought a court-ordered delay in Blockbuster's hostile bid for No. 2 Hollywood Video, citing concerns regarding late fees and other issues.

Antioco said the company has negotiated with the FTC to extend the FTC's scrutiny of the Hollywood-Blockbuster deal until March 21.

Rental revenue for the quarter was $1.147 billion (including $889 million DVD, or 77.5 percent of rentals), compared to $1.146 billion ($706 million, or 62 percent) last year.

Video game sales topped $239 million, representing almost 44 percent of overall sales, up 14.4 percent from the previous year. DVD sales increased $10.2 million, to $203 million, but declined as an overall percentage of sales from 43.4 percent to 37.2 percent.

In financial statements, Blockbuster said it spent $50 million launching the controversial “No Late Fees” campaign, a move the company said will decrease first-quarter operating income by $80 million.

In addition, Blockbuster said it would spend $70 million this year to reach 2 million online subscribers by first-quarter 2006. The company plans to bow an online video-on-demand venture in 2006.

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